Crowdfunding may attract GST: ATO

Andrew Colley

Australian start-ups seeking to use non-equity based crowdfunding may be required to levy GST charges, the tax office has told parliament.

The Australian Tax Office (ATO) has informed the lower house Standing Committee on Tax and Revenue that companies seeking to use non-equity crowdfunding websites such as those operated by Kickstarter and Pozible may be required to levy the GST, if they provide something of value in return for "donations".

The ATO says GST applies if a start-up offers something of value in return for a donation. Photo: Louie Douvis

Shadow Parliamentary Secretary Dr Jim Chalmers raised the issue with the tax office at a recent hearing in late August.

Last week the ATO - which took the questions on notice - provided the committee with its response.

The ATO told the committee that GST treatment of contributions would depend on a range of factors including whether they take place in Australia, whether the entity is registered for GST and what the contributor gets in return.

"In general terms, GST is only payable by an entity where it is GST registered or required to be, and it supplies something of value in return for a 'donation' from a contributor in Australia.

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"However, no GST should be payable by the entity where a contributor gets an equity or debt interest in return for the contribution," the ATO advised.

The ATO said it was considering providing more public guidance on the issue.

Paul Fletcher, parliamentary secretary to the Communications Minister, who has been leading the government's push for regulatory reforms declined to comment.

Shadow Assistant Treasurer Dr Andrew Leigh said that the ATO's brief answer indicated that it was still in the early stage of examining the GST implications for crowdfunding.

"I'd be concerned if GST treatment hampered crowdfunding and I would certainly like to see the ATO develop its thinking on the issue," Dr Leigh said.

"I think it's important because whenever there is uncertainty investors are going to go elsewhere. There are plenty of other things that people can be throwing their money in."

Ric Richardson, a Byron Bay inventor and entrepreneur, said he was concerned that the uncertainty was holding back Australian start-ups.

"Ethically, the Kickstarter community is not buying a product. Ethically, that community is supporting a business and giving them a shot."

He has been a vocal advocate of the merits of Kickstarter for start-ups and worked with Northern River's regional development body to conduct a start-up symposium in August.

At the time he told Fairfax Media that requiring start-ups to levy the GST would stymie their efforts to get inventions off the drawing board and into production.